So much depends on your investment horizon.

Markets could well get worse before they get better - it’s not hard to envision negative scenarios that aren’t really priced into the market. On a 12-24 month view, there is great uncertainty. But if you are thinking in terms of five years or more, this could actually be a good time to get into UK equities in terms of valuation.

UK Leisure has been hammered, and understandably. There are signs of lockdown being eased but this could all be reversed at the drop of a hat. If you look further out it gets easier to see a path back to previous levels of trading, but many companies in affected areas will go out of business between now and then.

I worry that most of the businesses to suffer will be smaller single and multi-site operators. Larger companies tend to have better access to more financing options and more favourable rates. As such they are better placed to navigate these conditions.

We’ve seen a raft of fundraisings from larger, public companies over the past week. These placings aren’t a silver bullet, but each one marks a de-risking to one degree or another in the respective company:

For many it is still too early to invest, with too many important unknowns. Key issues include:

  • When sites open. Social distancing is here for a while. At least until Christmas and possibly longer. This probably means operators with larger sites stand more chance.
  • Their level of trade. How will customers behave once they are allowed to go out?
  • The cost of reopening (stocking, cleaning, re-staffing).
  • Wider economic impacts of the lockdown. Everything else could just be rearranging deckchairs on the Titanic if the global economy tanks.
  • Potential for a second spike and timing of a vaccine.
  • Company-specific working capital requirements.

Restaurants: the canary in the coal mine

Even if you have no intention of going anywhere near this part of the market, it employs nearly two million people in the UK (or at least it did) and so it provides useful readacross.

Looking to countries further along the curve helps. This article…

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